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GMAC uncertainty alarms Chrysler dealers

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GMAC uncertainty alarms Chrysler dealers

Bradford Wernle

Automotive News -- May 17, 2010 - 12:01 am ET

Some Chrysler dealers, who now rely on GMAC Financial Services for retail and floorplan financing, were alarmed by reports last week that General Motors Co. is looking at reacquiring the auto lending company.

The acquisition would give GM a captive finance company -- and put GM in control of Chrysler Group dealers' main lender.

The plan appears tentative, and Chrysler declined to speculate on where it might lead.

Detroit automakers long have prized captive lenders because captives can sell more vehicles with special loans and leases subsidized by the automaker. But others -- notably Chrysler CEO Sergio Marchionne -- question that wisdom.

Bloomberg News Service reported last week that GM is considering several options: buying back GMAC, starting a new finance arm or assembling a coalition of banks and other lenders to provide loans to its dealers.

Dealer David Kelleher, a member of the GMAC dealer council for Chrysler dealers, likes the current arrangement, in which GMAC supplies loans to GM and Chrysler dealers.

Kelleher thinks the old captive business model helped push Chrysler and GM into bankruptcy last year. Under that model, he says, every time a carmaker "needs a shot of sales, you move the credit scores down 20 points until finally everybody with a signature can buy a car, delinquency rates grow and then we all get cut off."

Kelleher owns David Dodge-Chrysler-Jeep in Glen Mills, Pa.

In response to the reports, Chrysler said last week: "We have no indication from GMAC that our long-term contractual relationship is changing, so it would be inappropriate to comment on speculation. Chrysler Group is very pleased with our partnership with GMAC Financial Services."

GMAC, a unit of bank holding company Ally Financial Inc., has a four-year contract to provide retail and wholesale financing for Chrysler dealers. The arrangement was brokered by the Obama administration, which made GMAC Chrysler's lending arm when Chrysler entered bankruptcy in April 2009.

Marchionne has said captives helped drive the U.S. auto industry into a ditch last year. To survive, "car companies are going to be driven by their ability to make money selling cars," not by subsidizing loans to boost demand, he said last year.

Steven Rattner, who once headed the Obama auto task force that restructured GM and Chrysler, said last week that he sees no value in GM having a captive finance company again.

The federal government owns 56 percent of Ally and 61 percent of GM.

Read more: http://www.autonews.com/article/20100517/RETAIL02/305179959/1142#ixzz0oBtI7MlA

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